WO2001071526A2

WO2001071526A2 - System for ranking financial underwriters

Info

Publication number: WO2001071526A2
Application number: PCT/CA2001/000359
Authority: WO
Inventors: Christopher M. Henley
Original assignee: Henley Christopher M
Priority date: 2000-03-21
Filing date: 2001-03-21
Publication date: 2001-09-27
Also published as: GB2377060A; AU2001242169A1; CA2441810A1; GB0222431D0

Description

System for Ranking Financial Underwriters

FIELD OF THE INVENTION

The present invention relates to a computerized method and to a computerized system for ranking and/or rating the performance of financial underwriters (firms or individuals) who sell or advise on capital markets or securities issues (regardless of syndicate positions). More particularly, the present invention relates to a computer implemented process that applies data mining techniques to securities and capital market information to evaluate the performance of the financial underwriter.

BACKGROUND OF THE INVENTION

The present invention is concerned with the activities of financial underwriters. For the purposes of this document, the phrase "financial underwriter" is used to denote those individuals or firms who undertake to provide recommendations and predictions on capital markets, the economy and specific financial securities, and/or sell new issues (treasury or secondary), such as, for example, stocks, bonds and the like. The phrase "financial underwriter" therefore includes, for example, individuals or firms who act in respect of initial public offerings (IPO's), new issues of stock or other stock or securities offerings, debt, preferred or other financial issues or offerings, or research analysts who make recommendations and/or provide predictions on the future trends of the markets in stocks, shares, bonds or other securities. The phrase can also include the individuals or promoters responsible for the issue (or the like).

The phrase "financial underwriter" does not, however, include those individuals or firms who simply act to conduct financial securities transactions without any input or discretion on the financial underwriting decisions being made. The individuals or firms not included are primarily pension fund managers, mutual fund managers, and the like. While there currently exists simple performance measurement techniques to review the activities of financial underwriters, these techniques do not provide sufficient basis for providing a meaningful review of the past performances of the financial underwriter. For example, with respect to research analysts, it would be desirable to review the past recommendations of an analyst to determine whether his/her predictions on future market and/or securities performance were correct. In this fashion, the investor would have a more objective and statistically valid method for determining the past performance of the analyst, and thereby use the past performance of the financial underwriter as a method to judge his or her current predictions and recommendations. Also, the investor would have a method to rank and/or rate various analysts in order to compare their performance and select the analyst or analysts who is or are most likely to provide them with the best performance in their area of interest. Further, the method would provide a method for quickly evaluating and "culling" a list of financial underwriters to remove underperforming underwriters from further consideration.

With respect to new issues, for example, a financial underwriter determines the number of securities to be sold, and establishes a base price to be charged for the securities. The company essentially receives the gross proceeds of the transaction less expenses or the costs of issue. These new issue securities are usually sold at a set price before the general public is able to freely trade the securities on the various world markets. However, after a set date, the securities can be freely traded and the price of the securities will rise or fall depending on the value set on the securities by the public markets. In some instances, the price of the securities can increase or decrease rapidly after the securities become available to the public. Where the price of the securities increases significantly, it means that the value of the new issue of the securities was undervalued, and that the company missed out on realizing the full value of the securities. Where the price of the securities decreases rapidly from the new issue price, it means that the investor has overpaid for the securities, and stands to lose a portion of its initial investment. When a company pursuing a new issue process is selecting a financial underwriter, it would be useful to have a more objective and statistically valid method to rate and/or rank the performance record of the individual underwriter and/or the underwriting firm to determine whether it can expect to receive full value for its securities. Also, for an investor, it would be useful to obtain the performance record of the individual underwriter and/or the underwriting firm in order to determine whether the investor can expect the securities' price to increase after the new issue. Thus, the performance history of a financial underwriter would be of value to either the company entering the new issue process, or for the investor about to buy securities in a new issue process.

Similarly, with respect to research analysts, who make recommendations on, for example, stocks or other securities, and in particular, the timing of buying or selling particular stocks or securities, it would be useful to provide a more objective and statistically valid method to rank and/or rate their performance over time in order to compare the performance of one research analyst to others. For example, it might be of interest to determine the percentage of times that the analyst has been correct in their recommendations and predictions.

When reviewing the activities of a financial underwriter, it should be noted however, that individual underwriters usually work for investment dealers. As investment dealers, they may have a number of individual financial underwriters (or other parties (e.g. promoters, major shareholders etc.)) and the degree of collaboration between the individual financial underwriters in a firm can vary from firm to firm. Thus, it would not only be useful to evaluate the performance of a financial underwriting firm, it would also be useful to determine the performance history of an individual financial underwriter.

It would also be useful to track an individual financial underwriter who has moved from firm to firm in order to rate and/or rank his or her performance on financial deals worked on while at each firm. Within the firm, it would also be useful to determine the relative weight to be given to each individual financial underwriter who is involved with a particular deal (e.g. who was responsible for the deal). For example, the "lead" financial underwriter(s) on a particular new issue (for example) likely has more overall responsibility for the performance of the deal than an associate assisting on the deal. Additionally, various financial underwriters may have expertise in a certain sector or sectors, and their performance may vary depending on their level of expertise in that sector. For example, an underwriter skilled in underwriting a new issue for an oil & gas company, may be somewhat less skilled in underwriting a new issue for an electronics or computer related firm. Similarly, for example, a research analyst may have a good rating for predicting market changes with respect to financial institutions, but may be somewhat less skilled in predicting market changes in other areas. Further, the number of deals which a financial underwriter has been involved in may also influence their performance rating or ranking. For example, a financial underwriter who has been involved in numerous transactions may be given a higher rating than an underwriter who has provided similar returns on a smaller number of transactions. Additionally, it would be useful to evaluate the risk involved in the financial transactions undertaken by the financial underwriter. With respect to new issues, for example, a new issue of securities for an older established company would likely have less risk than a new issue of securities for a fledgling company raising capital in a new and unproven technology. Thus, the investor or issuer may want to determine a performance ranldng and/or rating of the financial underwriter which is adjusted to reflect the "risk" of the securities or securities issue. Accordingly, the investor or issuer may wish to obtain a risk-adjusted performance measurement.

Thus, it can clearly be seen that review of the past performance of a financial underwriter (either as an individual or as a firm) in a particular market segment would be of use to those investing in various securities.

Also, investors or issuers who conduct a number of securities market transactions over time, and/or on a regular basis, also need to constantly evaluate the performance of financial underwriters in order to identify any difficulties with a given financial underwriter, and/or select a financial underwriter having a performance ranking or rating more suitable to their respective needs.

Traditionally, however, this type of information is not readily available due to difficulties in establishing clear criteria for evaluation of the financial underwriter, and difficulties in determining the correct financial underwriter for a given transaction. For example, in situations where more than one underwriting firm is used, the lead underwriter is often given credit for the entire offering. Accordingly, the perceived performance of the lead financial underwriter may not be correct, and the performance of the second or third financial underwriter (regardless of their position in the syndicate) may not be considered.

It may be important to consider the role of the second, third or other underwriter in the syndicate. Such consideration may be necessary in order to further evaluate the performance of the underwriter. For example, the involvement of a particular underwriter in a selected transaction as a non-lead underwriter may still provide some "validation" of the deal to that firms' clients and to other investors, and may indicate that the non-lead underwriter has reviewed the deal and made some judgement on its value.

In a similar manner, the performance of a research analyst firm may be dependent on a small number of individuals, and the ranking and/or rating of the firm may be dependent on maintaining their relationship with those individuals.

Some information on the performance of financial underwriters is available from various sources. However, these prior art performance ratings merely provide a superficial review of the underwriting firms' historical performance, and tend to focus primarily on the performance of the underwriters based on gross proceeds raised. For example, with respect to financial underwriters involved in new issues, the prior art performance ratings primarily review only those new issues where the underwriters were the lead financial underwriter, or merely review the financial underwriter's performance based on current securities prices versus the new issue price. Also, financial underwriting firms are usually ranked according to gross proceeds, rather than by their investment performance, and in particular, rather than by their performance over a representative time period, and using an appropriate performance measurement.

Also, the prior art performance measurement methods do not include an adjustment for consideration of the risk of the underwriting deal.

SUMMARY OF THE INVENTION

Accordingly, it is a primary object of the present invention to provide a method for rating and/or ranking the performance of a financial underwriter (either as an individual, a part of a firm, or as a firm in general) in relation to their securities issues, recommendations, predictions and the like, related to the financial markets, and in particular, the capital markets, the economy or the securities market. It is a further object of the present invention to provide a computerized method for rating and/or ranking the performance of a financial underwriter.

It is a still further object of the present invention to provide a method for rating and/or ranking the performance of a financial underwriter in relation to their history of financial underwriting matters. It is a yet still further object of the present invention to provide a method for rating and/or ranking the performance of a financial underwriter which performance rating and/or ranldng is risk-adjusted.

The foregoing objects are attained by conducting data mining techniques on the information obtained from a variety of financial information sources, in order to relate the information obtained on capital (or financial) market activity to financial underwriters. This includes financial underwriters such as individual research analysts, new issue underwriters or new issue underwriting firms.

In particular, the above-described method is preferably risk-adjusted to factor in the risk involved in the financial transaction, and further, the method is particularly well suited for use on a computerized system, and in particular, a networked computerized system such as, for example, the Internet.

Accordingly, the present invention provides a method for rating and/or ranking the performance of a financial underwriter comprising the steps of: (i) accessing capital or securities market information sources to access data related to the transactions, recommendations or predictions of a financial underwriter;

(ii) initiating data mining techniques on the accessed data to extract and assign the data to said financial underwriter according to a selected plurality of financial underwriter selection criteria; (iii) comparing a selected, non-simple return value of one or more financial holdings from said transactions against a base level of said financial holdings to determine the performance history of the financial holdings over a selected time period, or, comparing the actual performance of one or more financial holdings to the recommendations arid predictions of the underwriter, and thus determine a performance history for the underwriter according to the underwriter selection criteria; and

(iv) comparing the performance history of two or more underwriters in order to rank the performance of the underwriters.

In a preferred embodiment, the above-described method also includes a computerized method, and still more preferably, the method also includes a method wherein the performance history for the financial underwriter is adjusted by applying a risk-adjustment factor in order to determine a risk-adjusted performance history; and subsequently comparing the risk-adjusted performance history of two or more financial underwriters in order to rate or rank the risk-adjusted performance of the financial underwriter.

A simple return value is merely the current market price related to the issue price. A non-simple return value is the return value calculated in some other fashion. The non-simple return value may be selected from a variety of methods of calculating returns, as is discussed hereinbelow.

Preferably, the various data mining techniques and performance history comparisons are conducted by a computerized system. Accordingly, the present invention also provides a computer-based technique for conducting a variety of data mining techniques and/or conducting performance history comparisons.

Further, the computer-based technique system can be a stand-alone PC system, or more preferably, is a networked computer system; either of which can conduct a variety of data mining operations in accordance with a variety of selected search design criteria.

This can include computers (or similar devices such as various computer access terminals or hand held PDA's) which are either physically connected or are remotely connected by, for example, the Internet. The "connection" can also be a wireless connection by, for example, satellite communication.

Most preferably the computer system is an intranet or Internet-based system that can be readily accessed by a number of interested individuals. A particular feature of an Internet-based system is that a wide variety of clients could conduct a series of rating and ranking operations to determine the effectiveness of a particular financial underwriter, and/or use the data mining techniques to select a preferred financial underwriter for their particular needs. The computerized method can be formatted to use selected, pre-chosen techniques for rating and/or ranking the performance of the financial underwriter using pre-set forms. Alternatively, the computerized method of the present invention can be a query-based system wherein the user can select from a variety of comparison or performance history rating and/or ranldng techniques.

The method of the present invention can also be established on an open access computerized system, such as for example, the Internet, so that those individuals interested in determining performance history rating and/or ranking of financial underwriters can conduct such ratings and/or rankings on a single use basis, a multiple use basis, or on a subscriber basis to receive updated information on a regular basis. Preferably, in operation of the present invention, a Web site would be maintained on the Internet which would contain the information related to capital and securities market information, general economic information, and information related to financial underwriters. By accessing the Web site, an interested party would request a search of the database information in order to rate and/or rank financial underwriters according to a variety of possible ranking and/or rating techniques. Preferably, the Web page would provide a series of Hypertext links through which the user would select products and information of use to him or her, and selected search criteria for conducting the analysis of the Web site data. The Web site could be used to provide single inquiry-type results, or could be used to generate a scheduled report to subscribers of the system.

The terms "Internet", "Web" and "Hypertext" are commonly used. However for clarity, the following definitions are used for the purposes of this document:

Internet - A collection of interconnected (public and/or private) computer networks that are linked together by a set of standard protocols (such as TCP/IP and HTTP) to form a global, distributed network. (While this term is intended to refer to what is now commonly known as the Internet, it is also intended to encompass variations which may be made in the future, including changes and additions to existing standard protocols.)

Web (or World Wide Web) - Used to refer generally to both (i) a distributed collection of interlinked, user- viewable hypertext documents (commonly referred to as Web documents or Web pages) that are accessible via the Internet, and (ii) the client and server software components which provide user access to such documents using standard Internet protocols. Currently, the primary standard protocol for allowing applications to acquire Web documents is HTTP, and the Web pages are encoded using HTML. However the terms "Web" and "World Wide Web" are intended to encompass future markup languages and transport protocols which may be used in place of (or in addition to) HTML and HTTP.

Hypertext - A computer-based informational system in which documents (and possibly other types of data entities) are linked together via hyperlinks to form a user navigable "web".

These terms, and others related to Internet technology, are defined in a number of documents. However, the terms as defined in US Patent No. 6029141 (Bezos et al.) issued February 22, 2000, the contents of which are incorporated herein by reference, are to be used for the purposes of the present invention.

In a most preferred embodiment, the present invention provides a method for rating and/or ranking the performance of a financial underwriter as claimed in Claim 1 which method comprises:

(i) accessing capital or securities market information sources to access data related to the transactions, recommendations or predictions of a financial underwriter;

(ii) providing a Web site that includes a browsable collection of the accessed capital or securities market data; (iii) providing access to said Web site by clients, and, in accordance with client requested search criteria, initiate data mining techniques on the accessed data to extract and assign the data to said financial underwriter according to a selected plurality of financial underwriter selection criteria;

(iv) comparing a selected, non-simple return value of one or more financial holdings from said transactions against a base level of said financial holdings to determine the performance history of the financial holdings over a selected time period, or, comparing the actual performance of one or more financial holdings to the recommendations and predictions of the underwriter, and thus determine a performance history for the underwriter according to the underwriter selection criteria; (v) comparing the performance history of two or more financial underwriters in order to rate or rank the performance of the financial underwriter; and

(vi) providing an electronic output of the rating and/or ranking results to the client through a Web page document.

As previously stated, the client can be a subscriber to the system operator and would be provided with routine access to the Web page, or would receive regular reports generated from the Web site (which could be electronically delivered to the client). Alternatively, the client could be a single-time user who would conduct a query-based search. The clients would preferably be billed for the searches conducted and the results generated. In an additional aspect, the present invention also provides a computer system for rating and/or ranking the performance of a financial underwriter comprising: (i) means for accessing capital and securities market information sources to access data related to the transactions conducted by the financial underwriter; (ii) means for initiating data mining techniques on the accessed data to extract and assign the data to said financial underwriter according to a selected plurality of financial underwriter selection criteria;

(iii) means for comparing a selected, non-simple return value of one or more financial holdings from said transactions against a base level of said financial holdings to determine the performance history of the financial holdings over a selected time period, and thus determine a performance history for the financial underwriter according to the underwriter selection criteria; and

(iv) means for comparing the performance history of two or more financial underwriters in order to rate or rank the performance of the financial underwriter.

The computer system can be a stand-alone PC, but more preferably is a networked computer system, and most preferably, the networked computer system is connected via an intranet or Internet system.

In a most preferred method, the computer system is an Internet based system. Accordingly, the present invention also provides an Internet-based system for rating and/or ranking the performance of a financial underwriter comprising: (i) a system for accessing capital and securities market information sources to access data related to the transactions conducted by the financial underwriter; (ii) a Web site for storage of the accessed data; (iii) a system for accessing said Web site;

(iv) a system for initiating data mining techniques on the Web site accessed data in order to extract and assign the data to said financial underwriter according to a selected plurality of financial underwriter selection criteria;

(v) a system for comparing a selected, non-simple return value of one or more financial holdings from said transactions against a base level of said financial holdings to determine the performance history of the financial holdings over a selected time period, and thus determine a performance history for the financial underwriter according to the underwriter selection criteria;

(vi) a system for comparing the performance history of two or more financial underwriters in order to rate or rank the performance of the financial underwriter; and (vii) a system for reporting said rating or ranldng information to said Web site.

DETAILED DESCRIPTION OF THE INVENTION

The present invention may be used to determine, rate and rank the performance of a financial underwriter, such as for example, a financial underwriter or a research analyst, to determine a historical ranking of the advice provided by the financial underwriter, or to determine, rate and rank the performance of financial underwriters involved in securities issues.

For the purposes of the present invention, the databases of capital and securities markets (such as stock markets), or other financial information (and thus, the source of ' input data) include a wide variety of financial information sources including newspaper or other media reports, newsletters, Securities Commission disclosure documents, private and public databases, company annual reports, and the like.

The term "data mining" is used to indicate that various analytical calculations are conducted in order to extract and use relevant data to the criteria selected by the user. These calculations can vary depending on the criteria selected and the manner of evaluating the financial underwriter. For example, the performance values could be adjusted by the size of the transaction, which might itself be adjusted by the price of the relevant securities, or the total value of the transaction underwritten by the financial underwriter, or the like. These techniques are all relatively straight forward once the data mining criteria have been selected.

The underwriter selection criteria can vary depending on the nature of the transaction, the nature of the end-user of the invention, the nature of the financial underwriter and the like. However, the input data can be collected into a variety of data categories based on the criteria of issue size, price, coupon, if debt, dividend, date of issue (e.g. closing of financing), date of issuance of a final receipt (i.e. free trading), type of issue (e.g. public, bought deal, private placement, IPO, secondary), category of issue (e.g. equity, debt, prefi), sub-category of issue (e.g. common, voting/non- voting, multiple/subordinated voting), sector (e.g. mining, financial services, high technology), sub-sector (e.g. by SIC Code software, hardware, biotech), syndicate position (e.g. lead, co-lead, co-managed etc.), dividends or interest, stock splits and consolidations, or a variety of other criteria.

The selected return value of the financial holding is generally based on publicly available information based on the price of the securities at the time of the request, or at a selected date. The financial holdings are preferably securities listed and traded on the capital markets, but can also include securities such as bonds and the like.

The "base level" of the financial holdings is generally the value of the securities at a selected point in time. For example, with respect to a new issue, the base level could be the initial price of the securities offering. With respect to the predictions of a research analyst, the base level could be the securities price at the time of the prediction and/or recommendation.

The "return" achieved by the transactions of the financial underwriter can be measured in a variety of ways. For example, the rate of return can be calculated using return rates including average returns, internal rates of return, compound returns, holding period returns, total returns, annualized returns, and the like. However, any appropriate return rate can be used. The return rate can be measured over any appropriate time period (e.g. daily, weekly, monthly, quarterly, annually, etc.). The selected return rate can be comprised of capital gains only, or more preferably, optionally also comprises any other return such as, for example, dividends and the like. In this fashion, the return rate is calculated on the total return of the investment. The return rate can also be calculated on either a nominal or real basis.

The performance of the underwriter could be calculated over a number of years in order to establish a longer term record of the underwriter's performance. Preferably, the performance of the underwriter is measured over a time period of at least 2 years. However, the records could be calculated for longer periods so that the performance of the underwriter over the past 3, 5 or 10 year period could be considered. Longer time period records could also be calculated and used in rating and/or ranldng calculations, if desired.

It is also generally preferable to select a return measurement system which recognizes the "time value" of money. In simple terms, an investment which earns 10% over 6 months is preferable to an investment which earns 10% over 12 months. The prior art method of calculating simple returns do not always recognize this fact. However, methods such as calculating an average return or an annualized holding period return can reflect the time value of money.

The ranking or rating of the financial underwriter can also be adjusted by the "risk factor" (as discussed hereinabove) of the transactions, so that a good performance in a higher risk area might lead to a lower ranking than a similar performance in a lower risk area. The risk factor can be determined by comparison to, for example, relevant past performance of similar transactions for a particular industry, sector, transaction type, or the like.

In a further, most preferred embodiment, the rating and/or ranking of a selected financial underwriter can be established so as to reflect their overall performance between a number of different types of transactions. Thus, it is possible to provide an overall ranking and/or rating of a financial underwriter which will reflect their performance on any type of securities-related transactions and/or recommendations or predictions. In particular, the method can be used to rate financial underwriters who are involved in specific capital or securities market areas. Of particular interest are those financial underwriters who are involved in any publicly offered securities including the fixed income market, the equity (or equity-linked) markets or any other public capital markets. It should be understood that the present invention is of primary utility in providing an evaluation of underwriters who are providing predictions and/or recommendations on a wide variety of events, and that there are few, if any, "common" transactions wherein the underwriters are commenting on the same transaction at the same time. Also, it should be understood that the method of the present invention allows for the comparison of the performance of a relatively large number of underwriters, such that the performance of two or more underwriters, from the large number evaluated, can be ranked and/or rated. Therefore, the method of the present invention is preferably used to compare the performance of more than 10 underwriters, more preferably, the performance of more than 20 underwriters, and still more preferably, the performance of more than 30 underwriters. The rating and/or ranking of a selected financial underwriter can also be adjusted to reflect their participation in transactions where more than one financial underwriter is involved. These multi-underwriter syndicates are common, particularly for larger transactions. In the practice of the present invention, it is preferred that the participation of a financial underwriter in such a multi-underwriter syndicate still be reflected in the rating and/or ranking of the underwriter. Since the underwriter is participating in the transaction, its involvement should be recognized and preferably is used in the calculation of the overall ranldng and/or rating of the underwriter. Accordingly, it is preferred that the accessed data is assigned to the financial underwriter regardless of syndicate position in a multi-underwriter syndicate transaction. Additionally, in order that responsibility be equally shared by all underwriters in a multi-underwriter syndicate, it is preferred that the accessed data is assigned equally to all financial underwriters regardless of syndicate position in a multi-underwriter syndicate transaction.

BRIEF DESCRIPTION OF THE DRAWINGS

The foregoing and other objects, aspects and advantages will be better understood from the following detailed description of a preferred embodiment and examples of the invention, with reference to the drawings, in which: ^' Fig. 1 is a flow-chart style description of the process of the present invention in respect of the ranking of financial underwriters;

Fig. 2 is a histogram of underwriter performance by number of issues; and Fig. 3 is a histogram of underwriter performance by percentage of issues.

DETAILED DESCRIPTION OF A PREFERRED EMBODIMENT OF THE INVENTION

Referring now to the drawings, and more particularly to FIG. 1, there is shown a flow-chart showing one particular method of the present invention. The method (generally depicted as 10) comprises the collection of information related to a series of new issues. The sources of input data 12 and market data 14 are as described hereinabove. The collected input data 12 are sorted 16 according to the input data sorting criteria, again as hereinabove described, to relate the financial underwriter information to the issue. Once the input data has been collected and sorted, it is related 17 to the market data 14, in order to produce a collection of combined data 18. Combined data 18 is then analysed to calculate a return rate 24 and to calculate the risk 20 (such as market volatility) for that particular market area. Once the risk has been calculated, a risk adjustment factor 22 is calculated and applied to the return rate in order to determine a risk-adjusted return 26. Finally, the risk-adjusted return 26 for each financial underwriter is compared to establish the period performance of the financial underwriter. This performance is ranked 28 against other financial underwriters according to the selected criteria (used to calculate the return or the risk adjustment) in order to determine, for example, the returns for different time periods, for type of issue, for sector or sub-sector, or the like. Based on their ranking, the financial underwriter can then be rated 28. A rating system can be established to compare the financial underwriters being reviewed.

The final performance ranking data may be presented in a variety of formats including providing lists of the top 10, 20 or 30 performers, or the worst 10, 20 or 30 performers, by type of issue, by sector or sub-sector and the like, or by providing histograms of returns for each underwriter and the like.

The output format can be modified to suit the needs of the person conducting the analysis.

EXAMPLE

The method of the present invention is demonstrated in the following examples. While the examples are simple and brief, they demonstrate the techniques of the present invention, and how the method can be applied to a more complex set of information.

In Table 1, a collection of input data is chosen to compare the performance of underwriters "A", "B", and "C". The input data is then related to the market data such as, in this example, the date of closing of the securities offering, the price of the securities at year end, and the dividend paid on each of the securities. Accordingly, Table 1 represents a set of combined data which provides market data which has been related to the input data.

In Table 2, the combined data is analyzed to determine the return rate of the various overall transactions. A number of different methods for analyzing the combined data are shown. The method of analysis can be chosen from a variety of methods, such as simple return (which is typical of prior art evaluation techniques), holding period return, average return, annualized holding period return, annualized holding period to group return, as shown in Table 2, or accordingly to a number of other methods.

In particular, a risk measurement factor, based on volatility is shown. Using the risk measurement factor, the combined data can be adjusted to determine a risk-adjusted return rate or ratio, and produce a set of risk-adjusted returns related to each underwriter. In Table 3, the financial underwriters are ranked according to the return rate method calculations shown in Table 2. Using a simple return technique, underwriters "A", "B" and "C" are ranked as being first, second and third, respectively, in performance. However, using other return rate evaluation techniques, other ranking orders are apparent. In particular, the annualized holding period return or the risk-adjusted return ratio provide the complete opposite ranldng such that underwriters "A", "B" and "C" are now ranked as being third, second and first. For an investor interested in this area, selection of underwriter "C" would likely provide the best total return based on the financial information shown.

In a further analysis, the return rates achieved by a given underwriter can be evaluated. In Table 4, each issue transaction of the underwriter is reviewed to determine its return rate. The issues of the underwriter are grouped together by the return rate for each year. The return rate groups are selected so that the issues are ranked in similar categories. For example, the category "(100)% - (75)%" indicates that the securities issue has lost 75 to 100% of its initial value. In 1997, of the 71 issues reviewed, 35 lost between 75 and 100% of their initial value, while 5 achieved greater than 100% gain on their initial value.

From the values shown in Table 4, a histogram of performance can be prepared and is shown in Figure 2. From Fig. 2 it can clearly be seen that for this particular underwriter, most of its issues lose the majority of their value after issue, and therefore, an investor should carefully review any issues presented by this underwriter.

In Table 5, the data of Table 4 has been adjusted to show the data in terms of percentage of transactions for the underwriter. A histogram of this data, shown in Figure 3, again demonstrates that most of the transactions of the underwriter have lost value after issue. Using histograms such as those shown in Figures 2 and 3 thus provides a method for comparison of the underwriting performance of different financial underwriters, and thereby provides a method for rating and/or ranking the performance history of a selected group of financial underwriters. Thus, it is apparent that there has been provided, in accordance with the present invention, a method for ranldng the performance of a financial underwriter which fully satisfies the means, objects, and advantages set forth hereinbefore. Therefore, having described specific embodiments of the present invention, it will be understood that alternatives, modifications and variations thereof may be suggested to those skilled in the art, and that it is intended that the present specification embrace all such alternatives, modifications and variations as fall within the scope of the appended claims.

Additionally, for clarity and unless otherwise stated, the word "comprise" and variations of the word such as "comprising" and "comprises", when used in the description and claims of the present specification, is not intended to exclude other additives, components, integers or steps.

Table 1: Closing Market Prices

Table 2: Return Rates (Various Methods)

Table 3: Underwriter Rankings by Return Rate Method

Table 2 Assumptions: 1. Assumes dividend is paid to holders of record at the end of the year (i.e. December 31 , 1999)

2. For purposes of the example calculations, nominal returns were used.

Table 4: Underwriter A: Performance based on Underwriting Returns (by number of Issues)

Table 5: Underwriter A: Performance based on Underwriting Returns (Based on Underwriting Returns 1997 - 1999)

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Claims

The embodiments of the invention in which an exclusive property or privilege is claimed are defined as follows:

1. A method for rating and/or ranking the performance of a financial underwriter comprising the steps of: (i) accessing capital or securities market information sources to access data related to the transactions, recommendations or predictions of a financial underwriter;

(ii) initiating data mining techniques on the accessed data to extract and assign the data to said financial underwriter according to a selected plurality of financial underwriter selection criteria; (iii) comparing a selected, non-simple return value of one or more financial holdings from said transactions against a base level of said financial holdings to determine the performance history of the financial holdings over a selected time period, or, comparing the actual performance of one or more financial holdings to the recommendations and predictions of the underwriter, and thus determine a performance history for the underwriter according to the underwriter selection criteria; and

2. A method as claimed in Claim 1 wherein said data mining techniques and said performance history comparisons are conducted by a computerized system.

3. A method as claimed in Claim 2 wherein said computerized system is a stand-alone PC system.

4. A method as claimed in Claim 2 wherein said computerized system is a networked computer system.

5. A method as claimed in Claim 4 wherein said networked computer systems is an intranet or an Internet-based system.

6. A method as claimed in Claim 4 wherein access to said networked computer system is via a wireless connection.

7. A method as claimed in Claim 2 wherein said computerized system of the present invention is a query-based system wherein the user can select from a variety of comparison or performance history rating and/or ranking techniques.

8. A method as claimed in Claim 1 wherein said financial underwriter is a research analyst who provides recommendations or predictions.

9. A method as claimed in Claim 1 wherein said financial underwriter is an underwriting firm or individual underwriters involved in a securities offering.

10. A method as claimed in Claim 1 wherein said financial underwriter is involved in the fixed income market.

11. A method as claimed in Claim 1 wherein said financial underwriter is involved in the equity market.

12. A method as claimed in Claim 1 wherein said financial underwriter is involved in any public capital market.

13. A method as claimed in Claim 1 wherein said capital or securities market information relates to a number of different types of transactions so as to provide an overall rating and/or ranking on the financial underwriter on any type of securities-related transactions, recommendations or predictions.

14. A method as claimed in Claim 1 wherein said selected return value reflects the total return of the investment.

15. A method as claimed in Claim 1 wherein said performance history for the underwriter is calculated using a method which recognizes the time value of money.

16. A method as claimed in Claim 15 wherein said perforrήance history for the underwriter is calculated by determining the holding period return.

17. A method as claimed in Claim 15 wherein said performance history for the underwriter is calculated by determining the an annualized return.

18. A method as claimed in Claim 15 wherein said performance history for the underwriter is calculated by determining the annualized holding period return.

19. A method as claimed in Claim 15 wherein said performance history for the underwriter is calculated by determining the average return.

20. A method as claimed in Claim 1 wherein the accessed data is assigned to the financial underwriter regardless of syndicate position in a multi-underwriter syndicate transaction.

21. A method as claimed in Claim 20 wherein the accessed data is assigned equally to all financial underwriters regardless of syndicate position in a multi-underwriter syndicate transaction.

22. A method as claimed in Claim 1 wherein the performance history of the underwriter is calculated on data collected over a time period of at least 2 years.

23. A method as claimed in Claim 1 wherein the performance history of the underwriter is calculated on data collected over a time period of 3, 5 or 10 years.

24. A method as claimed in Claim 1 wherein said performance history for the financial underwriter is adjusted by applying a risk-adjustment factor, so as to provide a risk-adjusted performance history; and subsequently comparing the risk-adjusted performance history of two or more financial underwriters in order to rate or rank the risk-adjusted performance of the financial underwriter.

25. A method for rating and/or ranking the performance of a financial underwriter as claimed in Claim 1 which method comprises:

(i) accessing capital or securities market information sources to access data related to the transactions, recommendations or predictions of a financial underwriter; (ii) providing a Web site that includes a browsable collection of the accessed capital or securities market data;

(iii) providing access to said Web site by clients, and, in accordance with client requested search criteria, initiate data mining techniques on the accessed data to extract and assign the data to said financial underwriter according to a selected plurality of financial underwriter selection criteria;

(iv) comparing a selected, non-simple return value of one or more financial holdings from said transactions against a base level of said financial holdings to determine the performance history of the financial holdings over a selected time period, or, comparing the actual performance of one or more financial holdings to the recommendations and predictions of the underwriter, and thus determine a performance history for the underwriter according to the underwriter selection criteria;

(v) comparing the performance history of two or more financial underwriters in order to rate or rank the performance of the financial underwriter; and

(vi) providing an electronic output of the rating and/or ranldng results to the client through a Web page document.

26. A method as claimed in Claim 25 wherein said performance history for the financial underwriter is adjusted by applying a risk-adjustment factor, so as to provide a risk-adjusted performance history; and subsequently comparing the risk-adjusted performance history of two or more financial underwriters in order to rate or rank the risk-adjusted performance of the financial underwriter.

27. A method for rating and/or ranking the performance of a financial underwriter as claimed in Claim 1 which method comprises:

(i) accessing capital or securities market information sources to access data related to the transactions conducted by the financial underwriter; (ii) providing a Web site that includes a browsable collection of the accessed capital or securities market data;

(iii) providing access to said Web site by clients, and, in accordance with client, query-based search criteria, initiate data mining techniques on the accessed data to extract and assign the data to said financial underwriter according to a selected plurality of financial underwriter selection criteria;

(iv) comparing a selected, non-simple return value which reflects the time value of money, of one or more financial holdings from said transactions against a base level of said financial holdings to determine the performance history of the financial holdings over a selected time period, and thus determine a performance history for the financial underwriter according to the underwriter selection criteria;

(v) adjusting said performance history by applying a risk-adjustment factor, so as to provide a risk-adjusted performance history; and

(vi) comparing the risk-adjusted performance history of two or more financial underwriters in order to rate or rank the performance of the financial underwriter; and (vii) providing an electronic output of the rating and/or ranking results to the client through a Web page document.

28. A method for rating and/or ranking the performance of a financial underwriter as claimed in Claim 1 which method comprises: (i) accessing capital or securities market information sources to access data related to the recommendations or predictions of the financial underwriter;

(ii) providing a Web site that includes a browsable collection of the accessed capital or securities market data;

(iii) providing access to said Web site by clients, and, in accordance with client, query-based search criteria, initiate data mining techniques on the accessed data to extract and assign the data to said financial underwriter according to a selected plurality of financial underwriter selection criteria; (iv) comparing the actual performance of one or more financial holdings to the recommendations and predictions of the underwriter, and thus determine a performance history for the underwriter according to the underwriter selection criteria; (v) adjusting said performance history by applying a risk-adjustment factor, so as to provide a risk-adjusted performance history; and

(vi) comparing the risk-adjusted performance history of two or more financial underwriters in order to rate or rank the performance of the financial underwriter; and (vii) providing an electronic output of the rating and/or ranldng results to the client through a Web page document.

29. A computer system for rating and/or ranldng the performance of a financial underwriter comprising:

(i) means for accessing capital or securities market information sources to access data related to the transactions, recommendations or predictions of the financial underwriter; (ii) means for initiating data mining techniques on the accessed data to extract and assign the data to said financial underwriter according to a selected plurality of financial underwriter selection criteria;

(iii) means for comparing a selected, non-simple return value of one or more financial holdings from said transactions against a base level of said financial holdings to determine the performance history of the financial holdings over a selected time period, or, comparing the actual performance of one or more financial holdings to the recommendations and predictions of the underwriter, and thus determine a performance history for the underwriter according to the underwriter selection criteria; and (iv) means for comparing the performance history of two or more financial underwriters in order to rate or rank the performance of the financial underwriter.

30. A computer system as claimed in Claim 29 wherein said computer system is a stand-alone PC.

31. A computer system as claimed in Claim 29 wherein said computer system is a networked computer system.

32. A computer system as claimed in Claim 31 wherein said networked computer system is connected via an intranet or Internet system.

33. A computer system as claimed in Claim 31 wherein access to said networked computer system is via a wireless connection.

34. A computer system as claimed in Claim 29 additionally comprising means for applying a risk-adjustment factor to said performance history, so as to provide a risk-adjusted performance history; and means for subsequently comparing the risk-adjusted performance history of two or more financial underwriters in order to rate or rank the risk-adjusted performance of the financial underwriter.

35. A computer system as claimed in Claim 29 wherein the computer system is an Internet-based system for rating and/or ranldng the performance of a financial underwriter comprising:

(i) a system for accessing capital and securities market information sources to access data related to the transactions, recommendations or predictions of the financial underwriter;

(ii) a Web site for storage of the accessed data; (iii) a system for accessing said Web site;

(v) means for comparing a selected, non-simple return value of one or more financial holdings from said transactions against a base level of said financial holdings to determine the performance history of the financial holdings over a selected time period, or, comparing the actual performance of one or more financial holdings to the recommendations and predictions of the underwriter, and thus determine a performance history for the underwriter according to the underwriter selection criteria;

36. A computer system as claimed in Claim 35 additionally comprising a system for applying a risk-adjustment factor to said performance history, so as to provide a risk-adjusted performance history; and means for subsequently comparing the risk-adjusted performance history of two or more financial underwriters in order to rate or rank the risk-adjusted performance of the financial underwriter.